Gold’s Downward Slide – Third Day in a Row
Gold’s printing‑press has been humming a sad tune for the past three days, and the price is now flirting with its lowest level since last September. Spot transactions have dipped under $2,600 a ounce, sending the metal into a brief existential crisis.
The Elephant in the Room: “Higher‑For‑Longer” Rates
The main culprit? The worry that interest rates won’t stay high and then tumble, especially with the big name Donald Trump back in the White House. Ruled‑in policies that could push inflation and corporate growth up the ladder have led Treasury yields to keep climbing.
Fed Shakes Up the Mix
- The Federal Reserve cut rates last week, but that didn’t fire up optimism for more cuts next year.
- According to the CME FedWatch Tool, the chance of a rate cut in January has dropped to 20% from over 60% just a month ago.
- Even if the Fed trims rates in January, the later probability for a March cut is merely 11%, down from 60% a month back.
These declining odds are pushing 2‑year Treasury yields to rise faster than their 10‑year cousins—now at 4.33%, the highest since July. It’s the classic “when you can’t escape the handshake, you’ll start taking the payroll” scenario.
Bonds vs. Gold – The Tug‑of‑War
With yields sprouting like mushrooms after rain, bonds look a bit more tempting. People are hoping the high numbers will stick around longer than expected, which nudges them away from passive gold and towards high‑upside stocks and high‑yield bonds.
It’s no surprise that the craze for risk‑y trading—market leaders hitting record highs, crypto making wild swings—has dimmed the allure of the yellow metal. Investors are piling onto equities and bonds, leaving gold’s home “empty chairs.”
Golden Outflows in ETF Time
- The SPDR Gold Trust (GLD) has seen net outflows of over $1.4 billion since early last week.
- iShares Gold Trust (IAU) came through with a modest $290 million inflow yesterday, but nothing else.
China’s Gold Appetite – A Silver Lining?
While the U.S. scene is heating up, China’s uncertain economic outlook—especially with Trump’s tendency to sprinkle trade wars like confetti—might actually revive gold’s status as the go‑to safe haven.
- An ongoing house‑price slump and Chinese stocks struggling to hold onto gains amid doubts about stimulus efficacy could push investors to buy gold.
- Asia continues to be the biggest global consumer of gold bars and coins. If the soup’s getting hot down there, that’s a bright spot for the metal.
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